Econ 111: Principles of Economics - Accelerated Treatment - Quiz 8
Consider the following numerical example of the simple Keynesian model with no government spending or taxes (all figures in $billions):
C = 100 + 0.9 Y
I = 50
a) What is the value of marginal propensity to consume (MPC) in this model? The marginal propensity to save (MPS)?
b) Solve for the equilibrium GNP algebraically. (Hint: Use the equilibrium condition Y=C+ I).
c) In equilibrium what is the value of consumption spending?
d) What is the value of investment multiplier in this economy?